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Consider the following information on a portfolio of three stocks: State of Probability of Stock A Stock B Stock C Economy State of Economy Rate of Return Rate of Return Rate of Return Boom .15 .02 .32 .60 Normal .55 .10 .12 .20 Bust .30 .16 − .11 − .35 a. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio’s expected return, the variance, and the standard deviation? (Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., 32.16161. Enter your other answers as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return % Variance Standard deviation % b. If the expected T-bill rate is 3.75 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected risk premium.
You want to add an additional stock to your portfolio and are considering two alternatives. For stock A, the expected return is 14.20% and the beta is 1.62. For stock B, the expected return is 8.40% and the beta is 0.46. According to the Capital Asse..
A firm expects to pay dividends at the end of each of the next four years of $2.00, $1.50, $2.50, and $3.50. If growth is then expected to level off at 8 percent, and if you require a 14 percent rate of return, how much should you be willing to pay f..
Assume a project has a sales quantity of8,600 units, plus or minus 5 percent and a sales price of $69 a unit,plus or minus 1 percent. The expected variable cost per unit is $11?3 percent and the expected fixed costs are $290,000plus or minus 2 percen..
Brewster’s is considering a project with a 5-year life and an initial cost of $120,000. The discount rate for the project is 12 percent. The firm is interested in knowing how the project will perform if the sales forecasts for Years 4 and 5 of the pr..
A six-month Twitter call option with an exercise price of $50.00 was traded at $4.25 per option on February 27, 2015. Assume that the risk free rate was 1.2% per year and stock price for Twitter on February 27, 2015 was $48.08. Twitter Inc. does not ..
The amount by which a project increases the value of the firm is given by which of the following?
The balance sheet of Tribank starts with an allowance for loan losses of $1.33 million. During the year, Tribank charges off worthless loans of $0.84 million, recovers $0.22 million on loans previously charged off, and charges current income for $1.4..
Break-Even Analysis- The Weaver Watch Company sells watches for $25, fixed costs are $140,000 and variables costs are $15 per watch. a) What is the firm`s gain or loss at sales of 8,000 watches? At 18,000 watches? b) What is the break-even point? Ill..
You own one share of a cumulative preferred stock that pays quarterly dividends. The firm has recently suffered some financial setbacks and has failed to pay the last two dividends. However, new funding has been arranged and the firm intends to resto..
Discuss why productivity is important, particularly in a healthcare organization. How do staffing models and labor optimization algorithms contribute towards productivity??
Seven years ago, you cut costs for employee health insurance by switching from open-ended insurance to health maintenance organizations (HMOs). At that time, you kept open-ended insurance for retirees because your employees told you that retirees wan..
An investment offers a total return of 12 percent over the coming year. Bill Bernanke thinks the total real return on this investment will be only 8.8 percent. What does Bill believe the inflation rate will be over the next year?
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